Bain’s Web3 and Metaverse consulting divisions have just secured another partner.
Richard Walker, a new partner at Bain & Company. and Co-Head of Digital Strategy for Financial Services has provided extensive advice to his clients on how to leverage blockchain-based Web3 and Metaverse concepts. But he said the lack of regulation is slowing adoption by the industry’s biggest players.
“Our clients are basically waiting for clarification,” he said.
Since the peak of the cryptocurrency bull market in November 2021, Web3, defined by Walker as “a decentralized, democratized environment with local currency and local digital rights ownership,” has attracted increasing interest from investors. A Bain research report found that private investment in Web3 technology has exceeded $80 billion, of which $48 billion has gone directly to financial market infrastructure.
From wallets to payments, brokers and exchanges, the financial services industry is well-prepared for the introduction of blockchain technology, Walker said. He added that the industry is “really building the underlying track and assets”.
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Before being appointed to Bain in July, Walker spent 12 years working in Deloitte Touche Tohmatsu’s digital assets division (though a Bain press release announcing his new role referred to his former employer as “another global business consulting firm”) . At Deloitte, he worked on the different uses of cryptocurrencies. At Bain, Walker said he was focusing on “building an optional introduction strategy” for financial services to implement Web3 technologies.
Walker’s work at Bain primarily involves implementing Metaverse practices and Web3 applications such as non-fungible tokens (NFTs) for bank clients and employees.
Big names in finance have begun to embrace so-called Web3 applications outside of cryptocurrencies, albeit cautiously. Bain’s client, JP Morgan, has been leading the way, issuing NFTs to attendees of its first cryptoeconomic forum in December.
Walker emphasized that despite regulatory uncertainty, major financial institutions remain interested in innovations in the decentralized internet. An example is the implementation of monumental NFTs. Although no clear regulatory framework has been established for the status of NFTs, the SEC is investigating token creators and cryptocurrency exchanges for possible securities fraud. According to the Howey test used by the Securities and Exchange Commission, securities are defined as “the investment of funds in an ordinary business enterprise with a reasonably expected profit from the efforts of others.” While not all NFTs are securities, the lack of a legal definition of securities has unnerved institutional investors.
Simplest solution? set them free. JPMorgan Chase used what the crypto world calls an airdrop — the transfer of NFTs to attendees’ crypto wallets. Other financial firms have taken a similar approach.Bank of America
BAC
However, this has not stopped holders from listing their NFTs on secondary trading sites such as OpenSea. After JP Morgan released their collection, one owner listed a token sale for 420 ETH (or $1.8 million at the time). The token was sold at $131.75 in December, according to PolygonScan.
Other banks, such as Goldman Sachs and Japanese giant Sumitomo Mitsui, are interested in NFT technology, but have not gone beyond announcing that they are exploring the tokenization of assets and the implementation of NFTs.
These different approaches come down to the risk tolerance of different banks, Walker said. “An organization whose core banking platform is reaching the end of its life will need to upgrade their technology anyway,” he said. “They may opt to use a digital banking real-time platform so they can get in faster than a bank that is in the middle of the platform’s investment cycle. Some Web3 type functionality.”
The path may not be straightforward or clear for blockchain technology or its application in financial services in the next 10 years. But Walker said he believes every small program, pilot, test and implementation will lead to more and more adoption.
“Obviously there will be a transition phase of transformation and adoption,” he said. “Every week there are small movements that form the basis for big shifts.”